Gold-Oil Ratio, Chinese And Indian Jewelry Buyers Lends Support To Gold Prices

“Don’t believe what you read about record-high gold prices,” advises our friend Frank Holmes, CEO of fund company U.S. Global Investors, not a moment too soon. “Yes, gold hit a high in nominal terms, but the price is more than 30% below the 1980 peak of $2,400 an ounce if you adjust for inflation.”

That, we believe, is only the beginning of the story.

“Gold is about to get even more attractive because we are heading into the fall and winter gift-giving season,” Frank continues. “This is the time of year when gold jewelers typically do their biggest business. The kickoff is the Muslim holy month of Ramadan, which starts next month and ends with generous gift giving in early September.”

As with recent years, the drivers of this seasonal strength are China and India:

“Back when the average per capita income in China and India was well below $1,000 a year,” says Frank, “gold prices hovered just above $200 an ounce. As average incomes have approached $3,000 a year over the past decade, gold prices have followed.